By TIOL News Service

NEW DELHI , NOV 21, 2014: THE appellant NASSCOM is an apex body with various software companies as its Members who together contribute subscription amount for achievement of various objectives of public, industry and national importance including awareness/education/exports/ intellectual capital growth/governance/standard/technology.

Revenue took a view that the subscription amount charged by the appellant from its Members would attract service tax under the category 'Club and Association Service'. Besides this, it was also alleged that the appellant had also provided ‘Business Exhibition service' & on which ST of Rs.2.12 lakhs is payable.

Resultantly, a total service tax demand of Rs.7,24,98,866/- came to be confirmed against the appellant along with penalties and interest.

NASSCOM is before the CESTAT.

The appellant submitted that they do not contest the Service tax demand of Rs.2.12 lakhs on account of Business Exhibition service and which they have paid along with interest before adjudication but they were not offered the option to pay penalty @25% of the ST demand.

In the matter of the ST demand confirmed under the head Club & Association Service, the appellant submitted that the issue stands decided in their favour by the Courts & Tribunal. They cited the following decisions -

++ Sports Club of Gujarat Ltd. vs. Union of India - 2013-TIOL-528-HC-AHM-ST

++ Ranchi Club Ltd. vs. CCE & ST, Ranchi Zone - 2012-TIOL-1031-HC-JHARKHAND-ST

++ Federation of Indian Chambers of Commerce and Industry vs. CST - 2014-TIOL-701-CESTAT - DEL

The AR defended the order of the adjudicating authority by reiterating the findings of the Commissioner.

The Bench observed that in the matter of demand made under the category of Club & Association service the same is not sustainable in view of the decisions cited and, therefore, the demand and penalty etc. was set aside.

As regards the ST demand of Rs.2,12,011/- on account of Business Exhibition Service the same was upheld since not contested.

Nonetheless, as regards the claim of the appellant in the matter of reduced penalty, the CESTAT observed -

“8. Since the appellant had paid the service tax of Rs. 2,12,011/- in respect of Business Exhibition Service even before the adjudication alongwith interest and since no option had been given in the adjudication order in terms of proviso to Section 78 of the Finance Act, 1994 to pay lower penalty by paying the same within a period of 30 days from the date of communication of order, in accordance with the judgment of Hon'ble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. Union of India (supra), the benefit of lower penalty in terms of proviso to Section 78 cannot be denied and accordingly the penalty under Section 78 is reduced to 25% of the Service tax demand upheld i.e. 25% of Rs.2,12,011/-. As regards penalty on the appellant under Section 77 the penalty for any contravention of the provisions of the Act or the Rules made thereunder has to be imposed only under the provisions in force at the time of offence and since during the period of dispute the maximum penalty which could be imposed under Section 77 was Rs.1,000/-, the penalty of Rs.200/- per day till the date of actual compliance is not sustainable. Accordingly, the penalty under Section 77 is reduced to Rs.1,000/-.”

The appeal was partly allowed.

(See 2014-TIOL-2315-CESTAT-DEL)